Full Service Broker vs Discount Broker: Which one is better for you?

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Most people have this confusion regarding where to open a Demat Account. To help you answer this question, I’ll first explain on the types of Demat Accounts and then answer the question regarding which type of Demat Account is better for you.

Demat Account can be majorly divided into 2 categories:

  • Full Service Broker
  • Discount Broker

Both these categories of brokers have been explained below in the detail.

Who is a Full Service Broker?

Full service brokers are also known as traditional brokers and offer a bundle of services. Along with providing a stock trading platform they also offer research and advisory, investment banking, sales and asset management under one umbrella and any other service at the option of the individual depending upon the requirement and offering of the stock broker.

Traditional brokers have both online and offline presence. Some traditional stock brokers also offer banking services along with Demat Account service and a trading platform.

Full Service brokers as the name suggests offer varied services due to which their commission is usually high. They generally charge on percentage basis, which is based on each trade executed. For example, if you are investing Rs. 100,000 and assuming the brokerage charged is 0.3%, then for every transaction of Rs. 1,00,000 they will charge Rs. 300 as brokerage fee.

Who is a Discount Broker?

With the rise of digitalization the preference of internet has increased manifold. This internet revolution gave birth to discount brokers. Unlike traditional brokers they do not have any physical presence. They only provide an online trading platform.

Morevoer, discount brokers generally do not offer investment advice as a service, although they may provide research and educational tools. It is more of a ‘do-it-yourself’ platform.

It is modelled on the philosophy of maneuvering technology to empower investors by providing them best service at competitive prices.

The USP of these brokers is the brokerage or commission that they charge which is very low as compared to traditional brokers. They generally charge a flat rate which in some cases is as low as ₹20 per trade irrespective of the value, and that too without any hidden charges.

For instance, if you are planning to invest ₹100,000 and assuming the brokerage fee is ₹20 flat rate. Then the brokerage will be ₹20 only. Thus, even if one were investing ₹500,000 or ₹20,000, it would still be the same.

Comparison between Full Service Broker & Discount Broker

Factors Full Service Broker Discount Broker
Brokerage Charged on percentage basis. Charges as a flat fee.
Service Bundle of services. Advisory service, investment service, asset management, tax planning etc. Online trading platform with exclusive features along with analytical investment tools.
Presence Both online and offline. Various offices and branches across the nation Usually only online presence.
 Research They have their own research departments for advisory. No such department.
Customer support Face to face customer service available at the various branches. Online customer support.
Add on services Research reports, recommendations, funding, extended margin etc. based on requirement. Only trading.
Banking Service May be available Not available
Deciding Parameters Brokerage and other charges, Customer services, Research desk and leverages Brokerage, Cost of transactions, Customer support, Call and trade services
Suitability Advisable for beginners, those who want advisory for their investment. Suitable for experts. Those who research on their own or have a financial advisor.

Which one should you opt for? Full Service Broker or Discount Broker?

After having an in-depth detail about the two types of stock brokers, we have arrived at the conclusion that both of them have their individual advantages and disadvantages. It depends upon the type of investor.

For an amateur investor who has just started or someone who wishes to explore the possibilities of the market it is advised to choose a traditional broker as they provide advisory services which aids them in understanding the market and make better investment decisions.

On the other hand, someone who is an expert or has trading experience should opt for Discount Broker and make the most of the low brokerage charges. It will help investors save a lot as compared to traditional brokers and eventually increase the overall profit.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and loves to help people with their Tax Queries.